TradersEXPO Trading the Open. Al Brooks. How to Trade Price Action BrooksTradingCourse.com

Transcription

1 TradersEXPO 2017 Trading the Open Al Brooks How to Trade Price Action Brooks Trading Course

2 Main Points H or L usually comes early Most days have early TR, then BO Gap openings: 4 trends Flags on the open 2 nd entry reversals Slide

3 BO on Open: 50% Reverse, No Matter How Strong Market looks for direction early in day Tries one way 50% of time, decides it is the wrong way Test of support or resistance can be very strong Still will reverse 50% of time Strong selloff on open Became L of day Strong rally on open Became H of day /17 Slide 3

4 Early BO: What Is Chance H or L of Day Already Formed? At the close of any bar, what is the chance that either the H or L of the day has already formed? Bar 7 Bar 12 The 1 st bar has 20% chance of being either the H or L of the day By the close of the bar, 50% chance the day has already made either the H or L There is often a 7 am report at the close of bar 6 that is catalyst /17 By the close of the 1 st hour (bar 12), 70% chance the day has already made either the H or L Slide 4

5 Early BO: What Is Chance H or L of Day Already Formed? By the close of bar 18 (90 min) 90% chance the day has already made either the H or L Bar 18 Nothing magical about the number 18 Bar 16 has a slightly lower % chance Bar 23 has a slightly higher % chance Traders just need an approximate time when the probability is high By the close of bar 80, 99.9% chance the day has already made either the H or L Knowing this does not help trading /17 Slide 5

6 Reversal on 5 Minute Chart: Creates Tail on Daily Chart 90% of time, low tail of bull bar on daily chart is created by early reversal up on 5 min chart and top tail is caused by late PB High Close 10% of time, bottom tail of bull day is created by late reversal up Tails in doji day form any time, but one usually created early Open of day Low of day 90% of time, top tail of bear day is created by early reversal down 90% of time, low tail of bear day is created by late reversal up 10% of time, top tail of bear day is formed by late reversal down 5 minute chart Daily chart Slide 6

7 Context: TR on Higher Time Frame If most days on daily chart were dojis and reversals, especially if within Tight Trading Range (TTR), probability is higher for today being a TR day TTR on daily chart Higher probability of TR today Expect strong moves to reverse Daily chart If today broke out below TTR, BO probably will fail and tomorrow will rally Bulls will look for early low tomorrow 5 min chart High probability of test of open of day in final 2 hours Slide 7

8 Context: Bull Trend on Higher Time Frame If most days on daily chart were bull trend bars, probability is higher for today having an early low that creates tail on bottom of bar on daily chart Bulls want an early test of the bears, confident they will be able to trap the bears and create an early low of day Daily chart 5 min chart Tail on bottom of bar on daily chart usually created by failed bear BO on the open on the 5 minute chart Bulls buy the bear close and the reversal up (here, 2 nd signal, bull signal bar) Slide 8

9 Daily Chart: Tail Forms Early in Day If most days on daily chart were bear trend bars, probability is higher for today having an early high that creates tail on top of bar on daily chart Bears want an early test of the bull strength, confident they will be able to trap the bulls and create an early high of day Daily chart Bears sell above weak buy signal bar and the reversal down (here, 2 nd signal, bear signal bar) 5 min chart Tail on top of bar on daily chart usually created by failed bull BO on the open on the 5 minute chart Slide 9

10 Main Points: Most Days Have Early TR, Then BO H or L usually comes early Most days have early TR, then BO Gap openings: 4 trends Flags on the open 2 nd entry reversals Slide

11 Most Days: Early TR, Then BO Breakout Mode (BOM) BO of range of 1 st 18 bars Here, also 18 bar BO Here, not BOM since never went below L of bar 1 Look for BO and then about a Measured Move (MM) Bar 18 Sell failed bull BO and then sell bear BO of 18 bar range Bar 18 BO Mode After 1 st 10 bars: Reversal down from new H and up from new L Today, bull BO, so 90% chance of either bull day or TR day Bear BO, so 90% chance of either bear day or TR day /16 Slide 11

12 Most Days: Mostly Sideways, Legs Up and Down Gap down Wedge Bear Flag (Opening Reversal down from MA) But, close above MA and closed the gap Many big bull bars Became failed Wedge I am NOT talking about these TR days today (even though they are more common than trend days) Today, I am talking about trends (breakouts or reversals) DB HL MTR /17 Slide 12

13 Main Points: Gap Openings 4 Trends H or L usually comes early Most days have early TR, then BO Gap openings: 4 Trends Flags on the open 2 nd entry reversals Slide

14 Gap Up: Bull Trend from the Open Many early big bull bars closing near H make bull trend or TR likely and make bear trend unlikely Must buy early Exit long Final Flag Top 3 bear bars so Sell The Close End of day profit taking is common Rally with lots of dojis and overlapping bars Looked like bull leg in TR Negative gaps and Tight Bull Channel so Small PB Bull Trend /17 Slide 14

15 Gap Up: Reversal down, Then Bear Trend from the Open Even with big gap up, many early big bear bars closing near L make bear trend or TR likely and make bull trend unlikely Consecutive bull bars on open, then 3 consecutive bear bars closing near lows Sell The Close Consecutive Parabolic Wedge Bottoms Buy reversal up, and Buy HL MTR 2017 Slide 15

16 Gap Down: Bear Trend from the Open Many early big bear bars closing near L make bear trend or TR likely and make bull trend unlikely Consecutive big bear bars closing below midpoint Always In Short Sell close of follow-through bar Despite strong bull bar on open, was Trend From the Open bear trend After 3 hour TR, got trend resumption down in final hour /17 Slide 16

17 Gap Down: Reversal up, Then Bull Trend from the Open Even with big gap down, many early big bull bars closing near H make bull trend or TR likely and make bear trend unlikely Trading Range so BO Mode setup for tomorrow Expect either trend resumption up or trend reversal down 1 st 2 bars are bull bars One is big bull bar Either buy the close of 2 nd bar or above H of 1 st bar Gap down Failed BO below yesterday s L Trend from the Open bull trend Buy the Close, bull Micro Channel /14 Slide 17

18 Main Points: Flags on the Open H or L usually comes early Most days have early TR, then BO Gap openings: 4 trends Flags on the open 2 nd entry reversals Slide

19 Big Gap Up: 8 Bear Bars, Then DB at MA 8 bear bars DB with L of day so Opening Reversal up from MA (support) Also, about 50% from rally up from yesterday s close /17 Slide 19

20 Gap Up: Wedge PB to MA Wedge Bull Flag is usually a High 3 It can also be a High 2 if there are 3 bottoms (3 attempts to rally) Opening Reversal up from MA (support) Stop When there is a strong min rally on the open, often goes sideways for hours Buy above strong buy signal bar Wedge Bull Flag, but High 2 About 50% PB and near MA Micro DB /14 Slide 20

21 Gap Down: Double Top Bear Flag Just below MA Gap down Double Top so Opening Reversal down from MA (resistance) Possible High of day Higher probability of profit if sell below bear bar or sell the close of consecutive bear bars /14 Slide 21

22 Gap Down: Wedge Bear Flag at MA Gap down Wedge Bear Flag so Opening Reversal down from MA (resistance) Sell below bear bar for possible H of day /14 Slide 22

23 Main Points: 2 nd Entry Reversals H or L usually comes early Most days have early TR, then BO Gap openings: 4 trends Flags on the open 2 nd entry reversals Slide

24 2 nd Failed BO H of Yesterday: Micro DT On the open, if the market reverses down from above yesterday s high, it might be making the H of the day Higher probability is 2 nd signal Micro DT so L2 Opening Reversal down from H of yesterday Wedge Bull Flag, HL MTR, Micro DB Too late to also call it an Opening Reversal up /16 Slide 24

25 2 nd Failed BO above Yesterday s H: Strong Bear L1 L2 Sell failed BO above yesterday s high 2 nd entry sell, below bear bar closing on low, and from higher H All create higher probability sell /17 Slide 25

26 ORV: 2 nd Reversal up from below Yesterday s Low Failed BO below yesterday s low Buy 2 nd reversal up (Opening Reversal) Want bull signal bar Stop /16 Slide 26

27 2 nd Failed BO below Yesterday s L: Reversal Day, Doji Day 2 nd failed BO below yesterday s L DB with L of 2 days ago Bear buy signal bar Ok to buy above bull bar /17 Reversal days usually fail to get much above H of open Often close near open so doji day Slide 27

28 Review H or L usually comes early Most days have early TR, then BO Gap openings: 4 trends Flags on the open 2 nd entry reversals Slide

29 TradersEXPO 2017 Trading the Open Al Brooks How to Trade Price Action Brooks Trading Course